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Buying an investment trust on a discount versus a premium

Images of sales signs, to illustrate how buying a trust on a discount can be profitable

This mini-series has previously explained investment trust discounts and premiums and why they arise. Read those articles first if you need to.

Bear markets are when you make your money. You just don’t know it at the time. Beaten-up markets enable you to buy future cashflows cheap, boosting your expected returns. That’s as true for investment trusts as for any other assets.

Indeed: pick-up unloved investment trusts on a discount and you can extra-juice your future returns, should that valuation gap narrow over time.

But alas! I haven’t just whispered the secret to getting rich quick into your ear.

Because it’s no easier to pick winners in a bear market than in a bull one. You’re still statistically likely to lag a tracker fund. (Although I’d argue it’s little easier to avoid outright losers once the froth has come off.)

Besides, even if you buy the indices you can’t know how long a recovery will take.

You can’t even be absolutely certain a recovery will come at all. Just ask anyone with a tin full of share certificates from Tzarist Russia…

However with those caveats out of the way, it’s a fact that investment trust discounts and premiums do wax and wane.

People overpay in the good times. While in miserable periods someone will sell at almost any price.

Check out this graph from Numis showing how discounts widening and narrowing is an age-old story:

I don’t believe it’s fanciful to try to profit from these cycles.

2022 and all that

Average discounts blew out towards historically extended levels in the ‘Sell Everything’ market of 2022.

Some trust sectors have rallied since, at least off the Mini Budget lows. You won’t find infrastructure or blue chip equity income trusts on a double-digit discounts anymore.

But what about technology, private equity, commercial real estate, or growth trusts priced at anything from 10% to 50%-off the value of their underlying assets?

You know – all the stuff we couldn’t get enough in the good old days of… 18 months ago?

All that is still priced to go. 

So if you’re an adventurous (/misguided) active investor and you’re ready to take a hit if you get it wrong, some bargains are surely out there.

Don’t discount it

The most important thing we need to think about when buying any investment trust – whether it’s trading at a discount or a premium to its underlying value – is obviously the potential impact on our wealth.

Recall that investment trusts are listed companies that own other assets. When you buy shares in an investment trust, you effectively become the owner of a portion of those assets.1

Your ownership of the trust’s assets is proportionate to your ownership of the trust.

For all but the oligarchs among us, this is most easily worked out by taking the total number of shares you own, and multiplying by the net asset value (NAV) per share of the trust:

  • If you own 1,000 shares of a trust with a NAV per share of £2, then your economic exposure to its assets is £2,000.

But as we’ve previously seen, a trust’s share price may be higher than the NAV per share. (It’s trading at a premium to net assets.)

Or it may be lower. (The trust trades at a discount).

And this complicates things!

Two ways to win (or lose)

Premiums and discounts come about for all sorts of reasons. We covered that earlier in this series.

The key point today is we have two moving parts when it comes to the returns we see from buying shares in a trust:

  • The movement of the trust’s share price. This determines how much we’ll get for our shares if we sell today.
  • The movement of the trust’s NAV. This reflects the underlying returns of the trust’s investments. NAV changes tell us how well the trust is performing, ignoring the gyrations in its share price.

As I said earlier, as a shareholder you have an economic interest in a proportion of the trust’s net assets. Thus it’s the movement of the trust’s NAV over time – ideally upwards – that’s most important over the long-term.

However over the short-term, share prices are kerrraaazy! They can do anything.

This means that if you want to sell on any given day, you’ll have to take the price you’re offered for the trust’s shares. Regardless of whether the shares trade at a discount (boo!) or a premium (yay!) to NAV. (Aka ‘What they are really worth’.)

Sadly you can’t demand the trust is liquidated just so you get the correct value for your assets. Well, not unless you own enough shares to influence the board of directors.

Sometimes trusts do wind themselves up. They’ll sell their assets and gradually return the NAV to shareholders via capital returns or dividends.2

But that’s rare, and it’s outside your control.

No, in practical terms your shares are worth what someone else will pay you for them. Whatever the underlying NAV might be.

This means that any movement in the discount or premium while you hold the shares can greatly affect the returns you see.

NAV growth and the share price

Provided the discount or premium remains unchanged during your ownership of the shares, the share price will simply capture the increase or decrease in the underlying assets.

People get confused about this. So here’s a quick example:

Let’s say you buy Monevator Investment shares at a 25% discount to the £1.60 NAV.

That is, you pay £1.20 a share.

The simply brilliant manager [ahem] makes great stock picks. The NAV doubles from £1.60 to £3.20.

Despite this superb performance, the discount remains unchanged at 25%.

Your shares now trade at £2.40 (75% of £3.20) against the NAV of £3.20.

You’ve made the same 100% return in the share price as the NAV has doubled, despite the persistent – but constant – discount.

How a narrowing discount increases your return

So far so straightforward.

But what’s more likely to happen is that the performance of a manager who has doubled the trust’s net asset value will be noticed by other investors. And these envious hordes will want a piece of the action.

More people wanting to buy the shares would typically lead to the discount being reduced (narrowing) as demand hots up:

Let’s say the discount narrowed from 25% to just 5%.

At a 5% discount to the £3.20 NAV, the shares would be trading at £3.04.

In this case, the doubling of the NAV – plus the closing of the discount –  has boosted the return you see on your initial purchase price of £1.20 a share.

In fact, you’ve made a 153% return, compared to just the 100% growth in the NAV.

Conversely, premiums can clobber your returns

A discount narrowing from 25% to just 5% is an unusually good outcome, unless you’re lucky enough to purchase shares in a trust when the market is going through one of its fits.

But the general point is clear. It’s great to buy an investment trust at 25% less than the value of its assets and then to see that markdown narrow due to good performance. You get a double whammy of a return!

If these things happened predictably we could all meet on a tropical island by Christmas.

In practice, discounts can persist for years – or ‘forever’ in practical terms. But they do often close, and it’s great when it happens.

On the other hand, when you buy a trust at a premium to its underlying assets then the converse of all the above can unfold.

If you buy an investment trust on a premium to NAV and that premium closes – either because the share price doesn’t keep up with NAV growth, or because the NAV doesn’t grow or shrinks, and the share price falls even faster – then the premium narrowing will reduce your return, versus the performance of the trust’s underlying portfolio.

For this reason, I almost never buy trusts on a meaningful premium.

When premiums fade

Some people – especially those who manage investment trusts – will tell you that it doesn’t matter if you buy at a premium. What is important is the performance of the underlying portfolio.

And it’s true that if you buy on say a 10% premium and in future sell at the same mark-up, then your returns will not be affected. Just as with static discounts, like we saw above.

However in my experience, premiums do not generally persist. Even trusts that more often than not trade at a premium – infrastructure trusts, for example – go through spells on a discount.

Why not buy them then, and get rid of the risk of paying over the odds?

Managers will point to graphs showing how delaying purchasing like this foregoes returns. But it’s a false choice. There’s almost always something else you can do with your money while you wait to buy near par.

RIT’s faded glory

In the original version of this article in 2010, I wrote:

One of my favourite investment trusts, RIT Capital Partners, frequently trades at a premium to its NAV, thanks to its great track record and investors taking optimistic views on the value of its illiquid holdings.

I don’t sell my RIT holding just because of the premium. I’d just have to buy back in later. But I have only ever bought the shares when they were priced at or below net asset value.

This is a cautious approach, and it will mean you will sometimes miss out on an excellent performance from a trust that’s become popular with investors.

Better safe than sorry is my view, but you’ll have to make your own mind up.

While it only goes back ten years, this graph from the AIC shows how RIT’s fading premium has taken the edge off shareholder returns:

Source: AIC

Starting in early 2015 RIT’s shares began to trade at a persistent premium to NAV. You can see this in the bottom chart. (Click to expand). The premium was over 10% by 2018.

No doubt investors at that time shrugged off paying a near-12% surcharge for exposure to RIT’s underlying assets. After all the record looked good – and with RIT your gains tend to be come with less downside than you get in the market, which is always nice too.

Happy days!

Sadly though, as I write the shares now trade at a thumping 22% discount to NAV.

This huge shift from premium to discount has scythed away about a third of the return that shareholders would have enjoyed if the premium had instead remained static.

Investors get off the Lindsell Train

An even more startling example comes with the Lindsell Train Investment Trust.

For many years investors paid an expanding premium for this trust.

Initially this seemed to be down to enthusiasm for manager Nick Train’s market-beating stock picks. But in time a more sophisticated analysis had it that the trust’s large shareholding in Train’s (unlisted) fund management company was undervalued. The premium, it was said, reflected the market correctly divining the true value of this large and fast-growing private holding.

To his credit, Nick Train was himself cautious. For example in 2016 Train warned:

“We would advise investors to think carefully before buying shares at such a steep premium to NAV.”

A fund manager telling people not to buy his fund? Needless to say, not the usual run of things.

It’s worth knowing though that Train had been warning about the trust being on a precarious footing for many years before that. In fact he said much the same when the trust was on a 21% premium to assets in 2012. The share price more than tripled over the next five years!

So perhaps we can almost understand how some shareholders persuaded themselves it was worth paying a roughly 90% premium – nearly double the NAV – to buy the shares in 2019.

Unfortunately, the music finally stopped and the years since have been rubbish:

Source: AIC

Notice here that – while hardly racing away – the NAV (orange line) has continued to grow since the date of the peak premium in 2019.

However the share price (blue, shaded) has sunk like a stone as the premium (bottom chart) has completed evaporated.

If you were unlikely (or foolish) enough to buy at the peak premium then your shareholding has been pretty much cut in half. Again that’s despite the NAV being modestly up since then.

When something can go wrong, it usually will

Now, in the case of both RIT Capital Partners and Lindsell Train there’s other stuff going on besides the gilding coming off an excessively buffed-up share price.

RIT had a rotten 2022 for a trust that some – incorrectly – expected to never lose money. Meanwhile Lindsell Train has seen market-lagging returns and fund outflows as its style has fallen out of favour.

In the face of these headwinds, there’s no eagerness to pay a premium for the assets. Hence the demise of those premiums.3

I would argue however that some similar rough patch will nearly always come along to take the sheen off shares that are priced to perfection.

If I like the long-term investment case, I’d far rather buy in that rough patch, and with a margin of safety. As opposed to in the best of times, where the potential downside is magnified by paying well above NAV for the shares.

Indeed I currently own both these investment trusts. And I bought them on a discount.

I wouldn’t avoid a trust on a small premium of 2-3%, if everything else checked out. And I’d probably hold if the price subsequently got carried away – at least within reason.

Generally, though, anything beyond that is a no-go. I like to stack the deck in my favour!

Cut-price trusts boost your income, too

Finally it’s worth knowing there’s an advantage for income seekers buying investment trusts priced below NAV.

You will get a superior dividend income from a trust on a discount. That’s because the trust will usually pay out the same cash stream from its net assets, regardless of the discount.

And since you’ve bought more exposure to those underlying assets for the same money, you’ll get more income than if the trust traded at NAV:

  • A 10% discount to NAV will boost your income from that trust by 10%, compared to if you bought when the share price at NAV.

There’s not many free lunches in investing, but buying a good equity income investment trust on a big discount may be one of them.

For this very reason, income-focused investment trusts usually trade close to their net asset value.

Not all that glisters is gold – or even cheap

Beware: a really big discount or one that is out of whack with other trusts in its sector can be a warning sign. Investors may rightly fear something is amiss with the trust (or know that it is) and so require a big markdown to assets before buying in to help protect their downside.

Look closely at such a trust’s gearing (debt), the sort of assets it holds, and management’s plans and track record. Consider the macro-economic backdrop, too.

A classic example right now are commercial property investment trusts. These are on a big discounts for a host of reasons.

Offices are half-empty, with people still working from home. Financing is dearer. Yields on alternative investments (particularly bonds) are higher.

These trusts have already written down the value of their assets. But there could be further to go, so NAVs could yet head lower. And all this could get worse with a recession.

Or… it could get better? Maybe interest rates will be cut, bond yields will fall, and workers keen to keep their jobs will show their faces in the office more, boosting occupancy.

Nobody (should have) said this stuff was easy.

By all means be contrarian if you’re an active investor with reason to believe you know better about one of these factors.

That’s my game, I won’t judge.

But if you don’t – don’t!

Buying trusts on a discount: naughty, but nice

In conclusion, I think rifling around for excessively unloved investment trusts is one of the more accessible ways to play the active investing game. Should you be inclined.

But before I get pilloried in the comments, I certainly am not saying it’s a sure thing. Nor that you will do better than buying a tracker, or anything like that.

This is still stockpicking. Most people do it poorly, especially on a risk-adjusted basis.

For related reasons, I’ve not bothered citing academic research into whether buying investment trusts on a discount is a way to capture market-beating returns.

I’ve read a few bits and bobs over the years. Most do detect ‘price signals’ – that is, they find evidence of future returns captured in today’s prices.

But I don’t really think such studies are especially relevant to private investors.

You won’t be buying a basket of every investment trust on a discount, weighted by the degree of apparent under-valuation, for instance. You probably can’t hold indefinitely. And you certainly won’t also be shorting trusts on a premium, which is the sort of thing academics love to do in their models but is both costly and risky in real-life.

You’re also unlikely to have the muscle to agitate for corporate change – a strategy often employed by professional bargain-hunters in closed-end funds.4

No, you’ll be looking for good trusts with decent prospects, priced more cheaply than you judge they should be.

Nothing more complicated. Nothing less simple. Fun, if you’re that way inclined.

Happy hunting!

  1. Remember you need to subtract any debt or other obligations carried by the trust, to determine the value of its net assets. []
  2. After subtracting any costs for doing so. []
  3. Lindsell Train’s board has also tweaked the valuation of that unlisted fund management business. []
  4. Investment trusts are a variety of closed-end fund. []
{ 18 comments… add one }
  • 1 Gabriela September 10, 2010, 12:56 pm

    ‘There’s not many free lunches in investing, but buying a good equity income investment trust on a big discount may be one of them! ‘

    And that’s the hard part, I’d say, recognizing whether you’re getting a free lunch, or you’re being that sucker at the poker table 🙂
    .-= Gabriela on: Visual Guide to ETFs =-.

  • 2 ermine September 10, 2010, 3:30 pm

    another welcome IT post, but are you sure about the header
    “Buying on an investment trust…” – the title says “Buying an investment trust…”

    One of the things I don’t get about ITs is how to evaluate the gearing component. If I’m a widget maker and I borrow from the bank for plant to make widgets I can see how to get a feel for that, but gearing in an IT puzzles the heck out of me.

    I’m hoping for an October storm for “the market is going through one of its fits.” sort of action…
    .-= ermine on: saving electricity at home =-.

  • 3 The Investor September 10, 2010, 5:07 pm

    @Gabriela – Well, as I recounted in this article there’s more than half a dozen investment trusts in the UK with multiple decade histories of paying a rising dividend income. No guarantees of course that anything in investing will continue, but there have certainly been times in that period where you could pick some of these trusts up for 10%+ discounts or more (such as the recent period linked to in the article). If you’re investing for income and so intend to hold and ignore any capital fluctuations, that’s a great time to buy.

  • 4 The Investor September 10, 2010, 5:10 pm

    @Ermine – Oops, you’re quite right, thanks for that! I’ve fixed it, though the error will live on for posterity in the ropey URL slug.

    Re: Gearing, I’ll pencil in a future article! It’s a very good point to raise, particularly in the context of income-focused trusts.

  • 5 xxd09 April 13, 2023, 5:59 pm

    I long ago got over having investment trusts in my portfolio-too risky for me
    I was however a avid follower of Personal Assets Trust as an investment that echoed my conservative investment views-Robin Anguses quarterly reports were a delight to read and learn from
    This Trust ensures that it operates all the time with no premium or discount on its share price which always struck me as the right way to be set up
    Sadly the trust was too small and too manager dependent (as are all investment trusts) for me to use
    Indeed Ian Rutherford (founder) and Robin Angus are all gone -new managers underway-Sebastian Lyon et al-will they be as good? Who knows

  • 6 The Investor April 13, 2023, 7:45 pm

    @xxd09 — Personal Assets is pretty huge now, I think approaching £2bn. There’s usually a very small premium (2-3%) which I believe they maintain for structural reasons (to facilitate the profitable discount control mechanism you cite) but you can occasionally swoop to buy them on a discount. Including, it seems, right now. 🙂

  • 7 stonefen April 14, 2023, 9:15 am

    If you believe in the merits of diversification then doesn’t it make sense to also diversify part of your portfolio away from market-cap weighted index tracking ETFs? If that’s the case then investment trusts could be useful. Also there are some areas, e.g. small-cap value, where there are no ETFs available to UK investors but there are ITs.

  • 8 xxd09 April 14, 2023, 9:49 am

    Thanks for that info-I still get PAT quarterly reports but not so scrupulous in reading them as I was -Robin Angus was a hard act to follow
    In retrospect they would have done the job for me but hindsight is not a basis for building a pension and savings unfortunately and they were too small and too individually run( dependent on one clever individual) to convince me at the time(I did have some shares and did OK)
    Indexing struck me as much safer for amateur investors and so it has proved-so far!

  • 9 Phillip April 14, 2023, 10:35 am

    Where’s a good place to find accurate up-to-date discount information? Thanks

  • 10 The Investor April 14, 2023, 11:15 am

    @stonefen — Certainly if you’re an active investor, but only (very) possibly if you’re a passive player. For example, my co-blogger is a passive evangelist but he long ago (over a decade ago) bought Aberforth Smaller Companies Trust to get his small cap exposure. With that said, I’m not sure he would now. The range of options has improved. The trouble is that trusts introduce extra kinds of risks – manager risk, discount risk, ‘tracking error’ in as much as it means anything here (i.e. you might not get the particular diversification you thought you wanted), execution risk, often illiquidity. Then we have the issue that passive investors typically won’t have built up much of an active investing muscle for sorting through this kind of thing. Perhaps there’s a case for adding something very big and very different (e.g. Brevan Howard Macro Global) but beyond that I’d say you’re taking a step into active investing, for good or ill, by adding trusts to the mix. 🙂

    @xxd09 — Well, Personal Assets as a portfolio is quite easily replicated (bar the idiosyncratic stock specific risk) so I agree you’re partly investing in it for (perceived) manager skill (how will they juggle these assets, etc?). If you don’t have confidence in that then yes, a pointless buy, especially with no discount to arbitrage away etc 🙂

    @Philip — I use AIC as a first base (see the links under the graphs) but I don’t 100% trust this data and always verify via RNS releases from the company itself. I believe / have heard that the AIC has some kind of methodology that estimates changes in NAV between official updates, but I’ve never come across a concrete explanation of it and that might be a myth. (In theory, you could say “Trust X captures Y% of the advance and Z% of the decline of A,B,C indices, and so apply some kind modifier to the latest NAV like that. I’m not sure it does).

    In the past I’ve made my own NAV estimators for certain trusts I’ve been interested in, just via Google Sheets.

    Working off out-of-date NAVs is a definite risk to be aware of with anything other than the vanilla trusts holding liquid stocks.

  • 11 Neverland April 14, 2023, 11:20 am

    I smiled when you mentioned Rothschild Investment Trust

    I remember when I started investing in RIT the discount to net assets was over 40%. It was before your graph started.

    Still 22% isn’t bad. Maybe I should restart.

    However all NAV are not created equal. A lot of RITs NAV is based on private investments with estimates not quoted holdings marked to market every day

  • 12 Windinthefens April 14, 2023, 3:41 pm

    The idea of always trying to buy at a discount and sell on a premium sounds great but presumably a lot of investors don’t manage that- ie the ones that are selling it to you! These are also likely to be relatively knowledgeable investors- the marketing for ITs isn’t anything like that for OEICs, so to have heard of ITs at all isn’t that common. Unlike a lot of ETFs, there is stamp duty to pay on buying them, which is a bit rich given that the fund manager would have paid it as well when buying the shares in the trust!
    I used them for three or four years and then lost my nerve- gone fully passive and just have to turn a blind eye to some very juicy discounts…..

  • 13 Neverland April 14, 2023, 4:02 pm


    What used to happen was you would buy at a discount and wait until arbitrageurs forced the trust’s board to do something about the discount.

    In the last century that happened a lot because investment trusts were a sleepy backwater and discounts were huge often more than a third of net assets.

    Eventually the arbitrageurs became hedge funds and the last big trust to be broken up was Alliance Trust about eight years ago.

    Then for a long time really attractive discounts just weren’t a feature of the investment trust universe apart from specialist trusts.

    Now I guess at less then 5% of the world market the whole UK stock market is such a back water its possible for large discounts to appear.

    RIT is a bit of a special case though as the “R” is for Rothschild.

  • 14 The Investor April 14, 2023, 4:25 pm

    @Windinthefens — Well oneself is the easiest person to fool and all that, but I’m not convinced I’m decidedly on the dumb side of some of these trades. For instance Scottish Mortgage Trust, which I’ve been nibbling at recently, was on a near-5% premium at the end of 2021 before the rate-inspired crash in growth stocks kicked off. It’s now on a bigger than 20% discount.

    Perhaps that reflects sophisticated trades gone wrong. I am far more inclined to think it represents the masses moving in and out of a former hot thing.

    Of course it’s not easy. If it was then ‘Weekend Reading’ wouldn’t have a link every other week on lagging active investing etc. 🙂 For sure I don’t always get it right. I also trade around a lot more than most ‘fundamental’ investors. This tends to stop me getting stuck in dogs but it does mean I curb my potential multi-baggers, too. (i.e. I hope readers get some insights/thoughts out of my posts, but they are certainly not guidance!)

  • 15 tom_grlla April 14, 2023, 10:07 pm

    Glad to hear you’re an LTI holder, esp. with the still weird-to-me opportunity to have been buying at a discount. It’s a great business in terms of margins, though obviously their AUM has flatlined, compared with the glory years when it went up up up. And the dividend is pretty tasty too. Oh and also the rest of the portfolio is also decent & the holdings aren’t nearly as expensive as they used to be. The ‘youngers’ come across well when presenting and seem to have drunk the Kool Aid, and coming up with good ideas – I thought FICO was particularly inspired. I don’t expect it to outperform the NASDAQ as it did for a long time, but I think it should be decent.

    Otherwise, the only thing I’d add on to the Discount discussion is liquidity – when I first started investing in ITs, I didn’t appreciate problems with smaller trusts in terms of liquidity, bid-spreads etc. so sometimes you might buy a trust on a whopper discount, but then discover it’s hard to sell. It’s a great shame as a chunk of ITs are filtered out by many because of this.

  • 16 Windinthefens April 15, 2023, 5:19 pm

    Sorry TI- I’ve no doubt about your ability to keep on the right side of IT trades- my doubt is about mine!

  • 17 AoI April 17, 2023, 4:11 pm

    At risk of stating the obvious one thought I would add is the proactivity of the investment manager and/or the board in attempting to close the discount and the extent of the incentives to do so.

    Some are restrained by size and liquidity of course it helps to be big and liquid when it comes to share buybacks lest they make the trust’s shares illiquid by reducing the amount in circulation and there are always idiosyncrasies (e.g. SMT butting up against its 30% private companies limit is exacerbated by share buybacks as they can only be funded from cash reserves or selling publicly listed shares)

    It also helps to have alignment of interests between boards, managers and shareholders. For example Bill Ackman’s firm Pershing Square Capital Management own 26% of Pershing Square Holdings. With PSH trading on a hefty discount Ackman writes in the annual report about relishing the opportunity to buyback shares at a steep discount and create value (they have bought back over 25% of it’s outstanding shares over the past 5 years) whilst also exploring a US listing or combination to increase the investor universe and reclassifying from a hedge fund to US equity fund all in an effort to address the discount. May or may not be effective but the fact the manager is a 26% owner of the trust and it is in their direct interest to create shareholder value by closing the discount is positive in my mind.

    Contrast that to the big PE trusts like HVPE and PIN who engage in token share buybacks of inconsequential size despite trading on discounts of over 50% vs their historical averages around 20-30%. Call me cynical but I question the independence of the boards, the managers fees are calculated based on the NAV hence it is directly contrary to their interests to buyback shares whilst it would benefit shareholders by helping to close the discount. The fact they do so little despite having the liquidity doesn’t seem to suggest a shareholder friendly approach, indeed they appear to act in the manager’s interest which is just to grow AuM and report an ever higher (/fictional?) NAV.

    Personally I try to lean toward dividend paying trusts when playing the discount game. For the reasons noted in the article i.e. the higher yield but would also add it can be a mitigant against the risk that the discount is persistent. On the PE example something like APAX Global Alpha paying out 5% of it’s NAV in dividends means you’re yielding 7% given the 30% discount and the dividend policy has the effect of chipping away at the discount given a portion of NAV is being crystallised for shareholders in the form of dividends every year.

    Just my view!

    p.s. I would second the interest in a gearing article. I find the PE and infra trusts particularly hard to get my head around. The gearing at the trust level is clear enough based on the debt on the balance sheet of the trust but where that trust is invested in assets that have leverage attached to them individually I find it next to impossible to get a sense of the overall level of leverage they don’t seem to report a comprehensive look through gearing ratio.

  • 18 The Investor April 19, 2023, 8:12 pm

    Since it was discussed here, encouraging update from RIT Capital today (I hold):

    RIT’s NAV total return for Q1 2023 was +0.7%. Notwithstanding the increase in RIT’s NAV, the share price suffered from some negative sentiment. We continued to take advantage of this, buying back RIT shares accretively in larger quantities than in previous years.

    One area of recent discussion has been in relation to the robustness of the valuation of RIT’s private investments. Our direct investments (representing 11.7% of NAV), are all held at audited 31 December fair values. Subsequent to the year end, we completed the sale of a core position (Infinity) in January at a ~30% uplift to the carrying value (in line with our historical average uplift). One of our top 5 holdings (Webull) is completing an equity issuance at a price above our carrying value, and we have agreed terms for a sale from two other top 10 holdings at carrying value.

    In relation to private funds (27.9% of NAV), 80% of these are now held at 31 December fair values from external managers (GPs). Reinforcing the widely diversified nature of the portfolio, these funds saw a blend of increases and decreases, with a modest overall decline contributing -1.0% to NAV. The strong Q1 performance seen across major indices, including for long-duration assets and fast-growing businesses, bodes well for valuations here in the future.


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